It seemed like a no-brainer, really.
For marketing entrepreneurs and agencies, opening “marcom” (marketing and communications) agencies in the Triangle catering to the needs of RTP’s high-tech companies was the next logical step. The telecom and dot.com sectors were booming, and tech-focused clients were willing to pay big bucks for marcom services.
The story was much the same in Charlotte and Atlanta, where the tech explosion sprouted many dot coms and related companies.
Then the economy screeched to a halt, the tech companies crashed fastest and hardest, and the agencies’ services were the first to fall victim to the cutbacks that were necessary to save struggling businesses.
“When we opened our office here at the beginning of 2001, our technology clientele was growing quickly, and we assumed that would be a major, perhaps the major, part of our business in the Triangle,” says Jim Tobin, partner with Detroit-based Brogan & Partners Convergence Marketing. “But as the bottom fell out on technology, a lot of good non-technology clients came our way and we’ve been able to grow in 2001 despite the tech trouble.”
The bad news is some of the bigger agencies, such as Brodeur Worldwide and Porter Novelli, were hardest hit…both slashed their Raleigh-based staffs…suffering cutbacks, layoffs and in some cases losing their presence in the Triangle. But the real story is the survival of the small boutique agencies. The high-tech PR industry in the Triangle has changed, and leading the way are flexible, client-oriented and generally-focused firms.
Some firms are growing
“We actually gained more clients in the downturn, because we offer boutique, highly-personalized service at a price that is two-thirds what a more established firm would offer,” says John Wagner, of Raleigh’s Indicium Communications, established less than a year ago. The most marked change in the public relations industry is the reasonable, affordable pricing structures.
Adds Tobin: “The silly money may be gone, but that’s fine. The folks who are calling us now seem to be more for real, with better ideas of what they can spend to grow their business.”
Where clients once signed retainer agreements in which they purchased a pre-determined package of services for a monthly fee, today’s agencies are more often bidding on work on a project-by-project basis.
According to Bill Dantini, chairman of BtB Marketing Communications in Raleigh, this change in the structure was a direct response to a change in philosophy at the technology companies.
“There’s zero long-term vision in current marketing and marcom programs,” he says. “Clients are operating day-to-day, and only allocating funds for critical marcom programs.” Dantini and BtB president Chris Burke started BtB in the late 80s, because they couldn’t find the tech-focused, business-to-business agency they needed as clients.
In addition to new pricing structures, many agencies are negotiating new payment schedules and methods. While some, like TrianglePR.com and BtB Marketing Communications, have waived fees or extended payment terms, others are negotiating stock options as part of the payment package.
Triangle Jumpstart, an agency that opened its doors in early 2001 to provide affordable public relations services to start-up companies, does this with its clients. “We negotiate each contract individually so that we can work within each client’s budget,” says Dave Murray, president of Triangle Jumpstart. “This recognizes cash constraints and sends a strong signal that we are willing to get in the boat and row with our partner companies.” The agency, according to Murray, has not really been impacted by the down economy, and is ahead of the schedule detailed in its business plan.
Diversification important, says Atlanta exec
A few years ago, the popular trend was to be an agency with one focused, niche-oriented clientele. Now, agencies are working to be more generalized, offering more services to different types of clients, and moving away from tech-only client rosters.
“Just like many businesses, having too narrow of a client base is dangerous,” says Marleen Burford, Director of Communications for Cox Interactive Media in Atlanta and a former president of the local chapter of the Public Relations Society of America (PRSA). Client diversification, she says, is even more important, and although a group might have expertise in high-tech, they need to have other areas in which they excel.
Tobin also adds that firms need to remember the basics.
“Marketing and advertising are marketing and advertising,” says Tobin. “I think a lot of technology firms thought that technology marketing was somehow magically different than marketing other products.”
The Triangle tech sector is not the only area that has felt the effects from the economic downturn. According to Burford, most agencies in Atlanta have undergone cutbacks, and “the corporate sector has moved to contract or freelance support rather than adding headcount.”
Because marketing budgets are often the first targets of spending adjustments by a company, they are also a good indication of how the economy is doing as a whole, says one former public relations executive.
“We are detecting a minor uptick, but it is customer-driven, not venture capital funding driven. We will know the economy is really back when VC money starts to flow,” he says. “[However,] venture capital firms have to realize that the days of 1500 percent return over three years are gone.”
Charlotte ready for growth?
According to Rose B. Cummings, president of the Charlotte chapter of PRSA, “The public relations field in the Charlotte region is robust as evidenced by the number of Charlotte-based companies using either in-house public relations professionals or [outside] agencies,” she says. “I think the Charlotte business climate is ripe for public relations practitioners looking for a position or considering opening an agency.”
This spring, for example, TrianglePR.com is expanding into the Charlotte area.
“Since about mid- to late November we’ve seen a noticeable uptick in new business inquiries,” Tobin says. “Some were feelers at first, but several have been firms that realized they’ve survived the shake-out, and they’re starting to market themselves again. I think they realized that you cannot save yourself out of sales slump. You have to market your way out.”
Dantini sees clients’ decreasing inventories, the development of the next generation of high-tech products and increasing client calls as signs of turnaround for the Triangle’s tech industry. “The economic indicators are optimistic,” he says. “I think we need the remainder of 2002 to stabilize and reload, and then we’ll see a prosperous 2003.”
Jon Bornstein, now Porter Novelli’s only Raleigh-based employee, says this is just the beginning of the next face for the Triangle’s technology community. “The Triangle is a great place to be if you have long-term vision. Today, early-stage companies are smarting from the clamp-down on venture capital,” he says. “But five years from now, the number of local start-ups and large technology companies based here will have grown significantly.”